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Trump Fills Two Fed Seats

Last week, two out of three open seats on Federal Reserve Board were finally filled by President Trump. Two of these openings have been empty for roughly three years.

A 2016 FOMC meeting (photo: Federal Reserve)

Trump nominated Randal Quarles, who worked previously at the Treasury Department, and Marvin Goodfriend, a former official at the Richmond Fed.

In addition to being newsworthy on its on merits, and an important change to the makeup of the Fed, the appointments stand in stark contrast with the vast number of vacancies that remain in the federal bureaucracy. Many of the most important departments of the executive branch are literally too empty to their jobs right now, even more than four months into the Trump presidency. According to Maudlin Economics, a staggering 442 out of 559 government positions requiring Senate confirmation (79%) don’t even have a nominee yet!

How the Trump administration will approach the Federal Reserve is an important question, albeit one with unclear answers. Interestingly, the president’s inner circle of advisors and cabinet members is filled with voices pulling him in two different directions: monetary policy radicals on one side and traditional Wall Street bankers on the other. At various times, Trump’s decisions or public pronouncements have seemed to hint at one side or the other holding more sway with the president. Thus, it’s still unclear how the White House will behave toward the central bank. Will it be more hawkish or more dovish than than during the Obama era? We still have only limited indicators so far.

You’ll find a quick look at all the future openings at the Fed that Trump will have the power to fill during his time in office here.

Fed Governors are nominated by the president (and confirmed by the Senate) to serve 14-year terms. However, it’s extremely rare for them to finish out the entire term. This is why it’s likely Trump will be able to fill three or four more seats on the Fed, even if he’s a one-term president.

Janet Yellen’s tenure as Chair ends in 2018, yet she could stay on as a Governor until as late as 2024. This is not a common practice, but given these fraught political times, it’s not outside the realm of possibility that Yellen chooses to stick around.

One pundit who has been especially critical of the status quo at the Fed is Danielle DiMartino Booth, an insider who formerly worked at the Dallas Fed. She has been named by MarketWatch as one of the “four economists to follow” during the Trump era.

Ms. Booth has not only offered an alternative perspective to the mainstream narrative generated by the Fed, but she has also offered clues in her frequent columns to how the Trump presidency presents the potential for a sea change in how the central bank is run. Right now, it is filled primarily with academic economists. Booth has advocated for more practical and common-sense views at the Fed. She has said that if Trump only does one thing about the Fed, it should be to replace the PhDs with people who have more hands-on experience and don’t have a particular agenda.

At the same time, Trump has an endless number of other priorities to focus on as president besides the Fed. In this case, he may leave the status quo in place. Booth recently stressed that we must root out the culture of “insider trading” that is essentially permitted by Fed members.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.